El Dorado maybe in sight at last - Guyana's Economy

Friday 18 February 2011

Since the late 1970’s and until recently, the economy of Guyana has been the sick man of the Caribbean falling second only to Haiti as the poorest country in the region.Much of that has changed, and the economy looks set to change for the better even more.

The improvement in Guyana’s economic circumstances will have several beneficial effects.Among them will be a reversal of the migration of people from Guyana to others parts of the Caribbean and, indeed, the world.This trend has already begun to happen, particularly from Caribbean countries.More than 80 per cent of Guyana’s tertiary educated people live outside of Guyana; a return of a fraction of them would help to accelerate economic activity and the rate of growth.

Apart from the remigration of Guyanese to Guyana, if the economy continues on its upward trajectory, the country could also become a magnet for nationals of other Caribbean countries, fulfilling its promise as the land of the future for the Caribbean Community and Common Market (CARICOM).

A richer Guyana would be good for CARICOM as a whole in other ways.Already, the share of Guyana’s imports from CARICOM countries has increased and, as the economy expands and advances creating a better-off population, that share will increase still further helping to sustain employment and revenues throughout the regional grouping.

Between 2006 and 2010, Guyana enjoyed average economic growth of 4 per cent – an enviable achievement among CARICOM countries, the majority of whose economies have contracted especially since the global financial crisis that started in late 2008.

The Guyana Finance Minister, Ashni Singh, attributes the growth in the economy to several factors, among them being the diversification of the productive sector; studied government policy decisions to generate activities that have a mutliplyer effect in the economy; and the creation of a stable environment for doing business.

In terms of the business environment, Singh emphasizes that Guyana enjoys exchange rate stability, low and declining interest rates, and a low rate of inflation.These factors give existing and new investors a platform of predictability for planning their businesses.In his January budget, Singh also lowered corporate taxes by 5 per cent to 40 per cent for commercial companies and 30 per cent for manufacturing firms.

There is certainly clear evidence of investment in the economy. The construction industry is booming across the country in housing, factories and office buildings. In turn, construction is spinning-off other growth areas in the supply of materials, transportation, and also in the spending by the work force on consumption – food, rent, clothing and so on.

Guyana’s debt to GDP ratio is now around 60 per cent, considerably lower than many CARICOM countries whose ratios are more than 100 per cent, and its foreign reserves represent five months of its import requirements.This is remarkable not only because many CARICOM countries are seeing their foreign reserves dwindling, but also because of the years of cutting back on imports that Guyana suffered because of insufficient foreign earnings.

A striking development in social terms is the steady increase in government expenditure directed at old age pensioners and other vulnerable communities.US$20 million is now dedicated to these communities, again with a mutiplyer effect in the economy since these funds are spent on consumption.In the current budget, the government has also allocated US$300 million to building roads, bridges, schools and hospitals; a sum twice as large as it was five years ago and which provides much needed pubic goods as well as employment, consumer spending and workers’ savings in banks.

A significant development in Guyana has been the use of Information Technology.More than 2,000 computer literate Guyanese young people, mostly women, are employed in call centres providing services to companies located in countries as distant as Australia.Experts suggest that the sector could employ as many as 6,000 people by 2013 given the fact that Guyana is English-speaking and its telecommunications infrastructure is improving to provide faster broadband service.

The salvation of Guyana has been in its natural resources, and the diversification of its productive base to exploit these resources more effectively.Twenty years ago, Guyana depended almost entirely on export earnings from sugar, rice and bauxite.Today, while these three commodities remain important, the agricultural sector has been diversified and Guyana is now a net exporter of agricultural products.

But, it is its other resources, especially gold, that has made a difference in recent years, and will catapult the country’s economic growth in the future.For instance, last year the country earned US$346.4 million from gold, almost three times the sum it earned from bauxite (US$114.6 m), sugar (US$104 m) and rice (US$154.6 m).Singh is confident that –as early as this year - the country’s gold sector is set for “catalytic investment” on an unprecedented scale that will earn the country even greater revenues while introducing new technology that conforms to the high environmental standards that Guyana has set as part of its policy to employ a low carbon development strategy.

And then there is oil.Studies done by the United States indicate that the basin off-shore Guyana contains rich reserves of oil.This possibility is now being explored by several oil companies, large and small, and there is even on shore exploration.It is almost a creed amongst Guyanese that it is only a matter of time before oil starts to flow.

Measured by its rich natural resources, its recent economic performance, and the investments set to be made in gold and oil, Guyana’s economic prospects and the contribution it can make to CARICOM look healthy and heartening.

2011 is an election year in Guyana.So far, there is no sign of anything but a peaceful process.The political parties are each engaged in trying to identify a candidate for the nation’s Presidency.There are five known candidates in the ruling Peoples Progressive Party and a similar number in the main opposition Peoples National Congress.By mid-March both parties would have chosen their candidate in processes which have been internally rancorous but have shown no sign of erupting into national strife.There are smaller political parties including the Alliance for Change which has a settled candidate.

Elections have to be held by November, and the campaigning season will start in earnest by April.Whichever party wins the Presidency and forms the government, it will inherit an economy that is stronger than it has ever been with every indicator for greater growth.For Guyana – the fabled land of “El Dorado” may be in sight at last if this election is conducted by mature democratic standards and the new government uses the country’s resources for the benefit of all, especially its disadvantaged.